May 2018

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The US in a complaint has accused India of wrongfully continuing and also providing fresh export subsidies to its textile export industry, instead of eliminating them, in clear contravention of trade rules of the World Trade Organisation (WTO). The US has mainly targeted Export Promotion Capital Goods (EPCG) scheme and the ‘Focus Markets’ and ‘Focus Products’ scheme which were provided to fight the worldwide slowdown in textile and apparel exports.

"As per rules of the WTO, a country with per capita income below US $1000 is permitted to give export subsidies to a particular sector, till exports from that sector are less than 3.25 percent of world trade in that sector and India crossed that threshold limit five years back”, Mr DK Nair – Secretary General of the Confederation of Indian Textile Industry said while speaking to fibre2fashion.

Explaining further he said, “However there is ambiguity as to the implementation period of the withdrawal of the subsidies. The implementation period can extend up to eight years, but there is no clarity on whether it will begin from the year India crossed the threshold limit or from the day a complaint is filed or from the day the complaint is resolved. Also, it is up to India to decide which subsidies to withdraw within the eight-year window.

“Secondly, India does not need to withdraw all incentives and subsidies. Those subsidies have to be conditional to exports. The main subsidy which may be affected is the ‘Focus Market’ scheme under which 2-3 percent cash incentives were provided. Also under the scanner is the special market-linked focus products scheme to promote apparel industry exports to the US and EU markets, which has been extended to the current fiscal year.

“The EPCG scheme which is also extended to promote exports of capital goods could also face the axe. Those schemes which are not specifically export targeted will not be affected. Example could be the hugely successful TUFS, which is not directly related to exports and is given to those irrespective of, whether they are selling in domestic or export markets”, he wound up this very informative chat by saying.